ESG Disputes Bulletin – March 2023
Welcome to the March edition of the ESG Disputes Bulletin, our quarterly update covering key developments in the UK, EU and globally on the full range of ESG topics.
In this edition:
Explore the key developments below
Greenpeace to sue EU Commission in the ECJ on the inclusion of fossil gas and nuclear power in the taxonomy of sustainable investments
Greenpeace has indicated that it intends to commence proceedings in the ECJ (in April) in respect of the ECJ’s decision to include fossil gas and nuclear energy in the list of sustainable investments promulgated by the EU (the “green taxonomy”).
This follows submissions from a number of Greenpeace chapters to the Commission in which they had argued that the inclusion of gas and nuclear in the taxonomy violates the Taxonomy Regulation, the European Climate Law, and the EU’s obligations under the 2015 Paris climate agreement.
Austria has also (in October 2022) commenced a legal challenge against the Commission on the decision to include gas and nuclear power in the taxonomy, and is seeking support from other member states in relation to this.
CJEU paves the way for an extension of manufacturer liability in the automotive industry
The CJEU was asked to clarify whether Directive 2007/46/EC establishing a framework for the approval of motor vehicles, read in conjunction with Regulation (EC) No 715/2007 that prohibits certain software solutions for reducing exhaust gas recirculation rates, must be interpreted as protecting the specific interests of an individual purchaser of such a vehicle. The CJEU confirmed this, thereby paving the road for a potential widening of manufacturer liability in regulated industries. Read more in our blog post.
Developments in relation to 2017 Duty of Vigilance law
First decision by French courts: dismissal of claims lodged by six NGOs against TotalEnergies
In October 2019, six NGOs initiated interim proceedings against TotalEnergies for breach of its duty of vigilance under the 2017 French Duty of Vigilance Law. The NGOs were notably seeking the defendant be compelled to suspend its petroleum projects in Uganda and Tanzania.
On 28 February 2023, the Paris Civil Court issued the first ruling on the Duty of Vigilance ground and dismissed the claims for procedural reasons. The Court notably considered that the requests fall within the jurisdiction of the Paris Court ruling on the merits, and not the court determining interim proceedings. It stressed that, with regard to the duty of vigilance, interim proceedings were only appropriate in three situations: (i) when the company has not drafted a vigilance plan; (ii) when the company has drafted a plan which is so light that it amounts to a non-existent plan; or (iii) when there is an obvious illegality. The Court found that none of these three situations were present in the case, which therefore required a thorough examination, i.e. on the merits.
The Paris Civil Court additionally considered that the requests made in the formal mandatory notice sent to TotalEnergies in June 2019 (which related to TotalEnergies’ 2018 vigilance plan) were substantially different to the requests eventually brought before the Paris Court (which related to TotalEnergies’ 2021 vigilance plan).
Interestingly, the Paris Civil Court noted that the French Duty of Vigilance Law remained vague, notably because the corresponding application decree has still not been published. For further details on the case, read our latest post here.
French NGOs take BNP Paribas to court for its support of fossil fuel projects
On 26 October 2022, BNP Paribas was given formal notice, under the 2017 Duty of Vigilance Law, to stop providing financial support for the development of new fossil fuel projects (see our December 2022 ESG Disputes Bulletin).
BNP Paribas replied to the formal notice and announced new commitments to reduce its outstanding oil extraction and production financing. However, on 23 February 2023, the NGOs Oxfam France, Les Amis de la Terre and Notre Affaire à Tous filed a civil claim against BNP Paribas before Paris Civil Court.
The NGOs ask BNP Paribas to, inter alia, stop financing the fossil fuel industry and adopt “an oil and gas exit plan” which adequately meets the requirements of the Duty of Vigilance Law.
For further details on the case, read our latest post here.
BNP Paribas sued by NGOs over Amazon deforestation link
On 17 October 2022, two NGOs (Brazilian NGO Comissão Pastoral da Terra (CPT) and the French association Notre Affaire à Tous) sent a formal notice to BNP Paribas under the Duty of Vigilance Law, alleging that the bank has provided financial services (for example, to the Brazilian meat industry) without adequate due diligence of corporations engaged in deforestation, forced labour and indigenous rights violation (see our December 2022 ESG Disputes Bulletin).
On 27 February 2023, unsatisfied with BNP Paribas’ response dated 11 January 2023, the NGOs filed a civil claim against BNP Paribas before the Paris Civil Court. The NGOs ask the bank to adopt a new vigilance plan that would, inter alia, identify the risks associated with the beef industry in Brazil, such as the invasion of indigenous lands and the methane emissions that contribute significantly to global warming.
Danone sued by NGOs over plastic use and reporting practices
On 28 September 2022, three NGOs – Client Earth, Surfrider Foundation Europe and Zero Waste France – put Danone on formal notice (along with eight other food companies) to better fight against plastic pollution as part of their duty of care (see our December 2022 ESG Disputes Bulletin).
On 9 January 2023, the NGOs filed a claim against Danone on the ground of the 2017 French Duty of Vigilance Law. They notably argue that Danone is not doing enough to reduce its plastic footprint and that it has not identified the use of plastic among the major risks linked to its activities in its 2021 vigilance plan.
The plaintiffs request Danone to be ordered to publish a complete report specifically accounting for the plastic used by the group in all its production activities, as well as including a concrete plan to reduce it.
The French State sued for "inaction" in promoting the development of renewable energies
In October 2022, Eolise, a consulting firm specialising in wind and photovoltaic projects, sent the French government a request listing the regulatory measures that would be necessary to accelerate the development of renewable energy.
In February 2023, Eolise filed an action against the French government before the Conseil d’Etat asking the French highest administrative court to "annul the implicit refusal of the request" and to enjoin the State to take "all useful measures" to develop renewable energies.
Regional Court of Stuttgart rules on greenwashing
The Regional Court of Stuttgart dealt with greenwashing allegations in two cases:
- A German detergent manufacturer once again successfully challenged the use of a “climate neutral” label for a competitor’s product (for the company’s earlier victory at the Higher Regional Court of Frankfurt, see the previous edition of the Bulletin; for other recent case law, see our blog post). The product in question was described as “climate neutral” both on its packaging and on the company’s website, but the manufacturer was not able to track all the emissions caused by the product and climate neutrality was achieved through compensation measures. The court held that advertising climate neutrality without mentioning that it was achieved through offsetting was misleading. According to the court, such advertising would only be legal if all emissions caused by the product had been tracked and fully offset throughout the product’s life cycle. The defendant has appealed the decision.
- The second judgment is an example of greenwashing claims in the investment sector. A German-based consumer protection association had brought a case relating to the advertisement for an impact fund which claimed to achieve a “measurable ecological impact”. The Regional Court of Stuttgart upheld the claim, finding that the advertisement was misleading. The court held that potential investors would understand the advertised specification of a certain CO2 reduction resulting from the respective investment as a fixed value that could not be undercut. In contrast, however, these specifications were merely non-binding targets set by the defendant.
Further climate change lawsuits against car manufacturers dismissed
Following the dismissal of the case against Mercedes by the Regional Court of Stuttgart in 2022 (read more in our blog post), three further climate change actions against car manufacturers have been struck down in the first instance in early 2023.
Like the Regional Court of Stuttgart, the Regional Court of Munich dismissed a lawsuit supported by Greenpeace which sought to force the company (in this case BMW) to stop selling CO2-emitting vehicles by 2030 (see press release). In parallel, Deutsche Umwelthilfe (an environmental NGO) lost a civil action against Volkswagen to reduce CO2 emissions at the Regional Court of Braunschweig (see press release). All courts referred to the principle of separation of powers, according to which only the legislator is entitled to make such general decisions, with the courts only applying existing laws in compliance with constitutional requirements.
In each case, the plaintiffs announced that they will appeal the decision.
The ReCommon case
In February 2023 the Administrative Court of Lazio determined that ReCommon (an NGO) has the right to access the assessment of environmental, climate and social risks associated with the Mozambique LNG fossil fuel project carried out by CDP (Cassa Depositi e Prestiti) before financing the transaction.
In 2019 CDP lent a considerable amount (more than 100 million euros), guaranteed by public insurer SACE (the state-owned Italian export credit agency), to the Mozambique LNG project. The project involves the exploitation of offshore fields and the construction of a gas liquefaction terminal in Cabo Delgado province, northern Mozambique, with an annual export capacity of 34 billion cubic meters of gas. The NGO brought the claim under the Italian legislative decree n. 195/2005 which constitutes the implementation of Dir. 28/01/2003, no.2003/4/EC (Directive of the European Parliament and of the Council on the access of the public to environmental information and repealing Directive 90/313/EEC of the Council).
Interim applications to intervene in and/or join the Shell v. Milieudefensie appeal proceedings
In the ongoing legal proceedings between Shell and Milieudefensie, two Dutch foundations (Stichting Climate Intelligence (“Clintel”) and Stichting Milieu en Mens (“M&M”)) separately filed interim applications in order to intervene in and/or join the appeal proceedings in support of Shell.
(i) M&M aims to promote the interest of “Concerned Energy Users” and their goal is to protect, promote and represent the interest and rights of Dutch civilians in relation to energy in a broad sense, including in legal proceedings. Pursuant to its interim application, M&M has applied to join Shell as it wants to mitigate the consequences of the judgment for Dutch society by making additional arguments in the appeal.
(ii) Clintel’s main objective is to generate knowledge and understanding regarding the extent, nature, drivers and consequences of climate change. Clintel applies to intervene in and, alternatively, to join Shell in the appeal proceedings in order to rectify the allegedly distorted view of climate science that has been presented to the Court of Appeals.
On 15 March 2023, the court hearing regarding the interim applications took place. It is currently expected that the Court of Appeal will decide upon the foundations’ interim applications on 9 May 2023.
Summary proceedings by various airlines against the Dutch State
In response to the Dutch government’s decision to reduce Amsterdam Airport Schiphol’s capacity of “flight movements” from 500,000 per year to 460,000 per year (with the ultimate goal of reducing flight movements to 440,000 by 2024), a number of airlines have joined forces to initiate summary proceedings against the Dutch state.
The goal of the Dutch government’s reduction plan is to ensure that Schiphol produces less noise pollution and reduces CO₂ emissions. In these summary proceedings, the airlines are likely to focus on the government policy regarding noise pollution. The airlines assert that the cabinet's decision is "incomprehensible" and argue that "[the] cabinet is imposing operational restrictions without having examined workable alternative solutions for noise reduction". The airlines say they are convinced that noise and CO₂ emissions can be reduced in other ways.
Increased flexibility for the UK government in implementation of the Paris Agreement
Court of Appeal and Mozambique LNG
In January 2023, the Court of Appeal handed down a unanimous judgment dismissing Friends of the Earth’s proposed judicial review of the UK Government’s decision to approve an export finance package worth $1.15bn in respect of a liquified natural gas project in Mozambique (the “Project”).
The legal challenge was brought in 2021 by Friends of the Earth on the basis that: (1) the decision to approve the funding of the Project was incompatible with the UK’s commitments under the Paris Agreement (and/or did not assist Mozambique to achieve its commitments under the Paris Agreement); and (2) in approving the decision, the Government failed to take into account relevant considerations.
At first instance, a Divisional Court of two judges was split in its judgment. This led to an appeal in which the Court of Appeal reiterated several key principles applicable to those bringing or defending climate-related judicial reviews, including:
- that the standard of review which the courts will apply varies and may, as in this instance, be less intense where the issue is not properly within the jurisdiction of the domestic court. Where a decision-maker takes into account unincorporated international law such as the Paris Agreement, the question for a domestic court is not whether the decision-maker’s view as to that law was correct, but merely whether it was tenable; and
- that for technical questions such as quantification of emissions, public authorities enjoy a wide margin of appreciation and, in this instance, the government’s conclusion in respect of the quantity of emissions was within that margin of appreciation.
For more detailed analysis, see our separate analysis. Friends of the Earth have applied for permission to appeal the decision to the Supreme Court and we expect a decision on that request later this year.
High Court and Bristol Airport
On 31 January 2023, the High Court dismissed an application for judicial review from the Bristol Airport Action Network Co-ordinating Committee (“BAAN”) challenging Bristol Airport’s proposed expansion. Viewed together with the Court of Appeal’s dismissal of Friends of the Earth’s challenge earlier that month, the cases suggest that the path to challenging decisions on climate change grounds may be a narrow one, with deference shown to public bodies’ assessments and emphasis on the particular facts of each case. Further challenges should nonetheless be expected, and the Court went out of its way to emphasise the “very great importance” of climate change.
The case concerned a statutory review of a planning inquiry’s decision to allow Bristol Airport to proceed with its planned expansion following the local council’s rejection of the plans on environmental grounds. In its judicial review application, BAAN argued that the planning inquiry panel had erred: (1) in its interpretation of two local development plan policies and a Government airport runway policy; (2) in treating the Climate Change Act 2008 and the various duties under it as a “separate pollution regime”; (3) in refusing to consider the impact of the proposal on the local authority’s carbon budget; (4) in concluding that Bristol Airport’s Environmental Impact Assessment was lawful in circumstances where it did not address the impact of non-CO2 emissions; and (5) in concluding that the proposal complies with the Special Area of Conservation objectives. Further detail is provided in our case summary.
Despite rejecting the claim on all grounds, the Court expressly acknowledged at the beginning of its judgment that climate change is “generally regarded as a matter of very great importance”. In its conclusion, the Court emphasised that this case wasn’t about whether emissions from the use of additional aircraft should be ignored, but about how and by whom those emissions should be addressed – a challenge to the expansion of Bristol airport was not the appropriate venue.
ClientEarth sets its sights on the Financial Conduct Authority with legal challenge to approval of prospectus
In the first climate-related challenge to an IPO prospectus, ClientEarth has sought to challenge the decision by the UK’s financial regulator, the Financial Conduct Authority (“FCA”), to approve the prospectus of Ithaca Energy plc (“Ithaca”), a UK-incorporated oil and gas operator in the North Sea.
In order to progress to a substantive hearing, an application for judicial review requires the court’s permission and so it is not yet clear whether this case will be allowed to proceed.
The claims made by ClientEarth focus on the ESG-related disclosures made in Ithaca’s prospectus. It asserts that the prospectus doesn’t explain how Ithaca’s business and finances “might be affected by full or even partial achievement of the Paris Agreement goal”.
We have previously seen litigation used strategically to further the ESG agenda and claimants may well consider that there is value in the publicity associated with even groundless or weak claims.
The claim sits within the broader context in the UK of heightened climate disclosure obligations for publicly-listed companies, most recently implemented through changes to the Listing Rules, as recommended by the Task Force on Climate-related Financial Disclosures (see our summary of the new requirements here).
Climate risk in boardrooms: ClientEarth files derivative action against Shell plc
In addition to its judicial review against the FCA, ClientEarth has also filed a claim which seeks to bring a shareholder derivative action against the Board of Directors of Shell plc under section 260 of the Companies Act 2006 alleging mismanagement of climate risks. ClientEarth has commenced the claim as shareholder. It is the first climate related derivative action against a Board of Directors under the Companies Act. The Court’s permission will be required to proceed with the derivative action.
Spotlight on climate-related collective redress in the High Court
Two recent High Court decisions shine a light on the key factors that UK courts take into account when assessing interim matters in mass tort claims.
Jalla and Others v Shell plc
In its latest judgment in a long-running dispute relating to the Bonga oil spill in the Niger Delta in 2011, the High Court considered which date actionable damage occurred (if at all) for the purpose of determining the applicable limitation period for the claim.
To determine whether any damage occurred, the Court assessed detailed evidence, including from experts, on whether it was plausible for the oil spill to have: (1) impacted the mouth of the Benin river; (2) subsequently become stranded on the shoreline, the seabed or in river estuaries; (3) been remobilised by weather events; and (4) been transported inland. The Court found against the Claimants on the evidence and concluded that there is an alternative credible explanation for any oil pollution experienced in each relevant community on the dates that had been put forward – i.e. other oil spills or leaks caused by crude oil theft, sabotage, illegal refining and/or otherwise.
The Court nonetheless went on to address the question of limitation for completeness. It was common ground that this was a matter of Nigerian law and, having heard from Nigerian law experts, the Court agreed with Shell plc that a shorter limitation period applied. Shell therefore succeeded in limiting the scope of the Bonga oil spill claim, though the Supreme Court is due to hear a related strand of the claim at the end of the month. The question before the Supreme Court is whether pollution causing ongoing or fresh damage constitutes a continuing nuisance giving rise to continuing causes of action until it is cleaned up. Further detail is provided in our case summary.
Bravo and Others v Amerisur
By contrast, in January 2023, a rural community from the Puntumayo region of Colombia secured a mandate from the High Court to proceed with their claim against Amerisur Resources, an oil exploration and production company headquartered in the UK whose subsidiary owned oil production and development blocks in Colombia. In that case, it is common ground that the oil spill was caused by the FARC who intercepted crude oil being transported from a block owned by Amerisur. The 171 claimants were granted a Group Litigation Order which enables the claims to be managed jointly. The interim questions before the Court on this occasion were: (1) whether a two- or ten-year limitation period applies under Colombian Law; and (2) whether parent companies can be liable for the actions of their subsidiaries under Colombian law.
The High Court heard evidence on both issues from Colombian law experts and found in favour of the Claimants on both issues. Although each case turns on its facts and on the nature of the laws governing the claim, the ruling may encourage similar claims to be brought in England where they would otherwise be time-barred if brought on a collective redress basis in their home jurisdiction. The substantive trial will therefore be closely watched.
We provide a detailed summary of how the Court arrived at those conclusions in this briefing.
United States of America
United States of America
United States of America Greenwashing claims
Greenwashing litigation continues to gain momentum in a variety of areas. For example, in February 2023, a major automobile manufacturer defeated a false advertising lawsuit alleging that the manufacturer had overstated the distance its hybrid vehicles could travel on electricity alone. The federal district court for the District of New Jersey held that the manufacturer’s statements did not amount to a promise to customers, as distances in their advertising campaigns were always couched as “estimated” or the result of “preliminary testing”. In addition, in February 2023, shareholders of a bioplastic company brought a derivative suit, claiming that the company had overstated the biodegradable potential of one of their plastics, causing public criticism and a share value drop of 13%.
Some organisations are choosing to take their greenwashing disputes before regulatory agencies. In January 2023, an environmental advocacy group filed a whistleblower complaint with the U.S. Securities and Exchange Commission (“SEC”), claiming that a meatpacking company fraudulently misled purchasers of its sustainability-linked bonds by failing to disclose key information regarding its carbon footprint. In February 2023, another environmental group filed a complaint with the SEC against a major oil and gas provider, alleging greenwashing claims with respect to its fossil gas investments.
Climate Impact Suits and ESG litigation against state and federal governments
Private plaintiffs continue to bring lawsuits against state and federal agencies for policy impacts on the environment. For the first time in U.S. history, a children’s climate lawsuit is heading to trial in Montana state court in June 2023. Sixteen youth plaintiffs sued the Montana government, arguing that the implementation of the state energy policy and the climate change exception to the Montana Environmental Policy Act violates the plaintiffs’ State constitutional right to a “clean and healthful environment”. In March 2023, various environmental groups filed a lawsuit to prevent the Bureau of Ocean Energy Management from offering drilling rights on 73 million acres along the Gulf of Mexico. Plaintiffs argued that the Bureau of Ocean Energy Management violated the National Environmental Policy Act by failing to consider the environmental impacts of the land sale or consider alternatives. In February 2023, a global management consulting firm, while denying all allegations, paid a $25 million settlement to wildfire victims to resolve potential claims related to its work with a state utility company.
Against a background of mounting anti-ESG sentiment, government agencies faced several challenges to proposed ESG policies. In January 2023, a coalition of 25 states and several private plaintiffs filed suit under the Administrative Procedure Act to prevent the Department of Labor (“DOL”) from enforcing its “ESG Rule,” which permits investment plan fiduciaries to consider ESG factors when selecting retirement investments and exercising shareholder rights. The plaintiffs argue that the final rule goes beyond the statutory authority of the DOL and “undermines key protections for retirement savings of 152 million workers”. Ultimately, the plaintiffs are seeking a preliminary injunction and a declaration that the ESG Rule violates the Administrative Procedure Act and the Employment Retirement Income Security Act of 1974 (“ERISA”) and is arbitrary and capricious. In February 2023, a similar suit was filed in which two private plaintiffs argued that the DOL’s new rule violates ERISA and exceeds the authority granted to the Secretary of Labor by statute.
Employment Discrimination Cases are on the Rise.
Litigants are increasingly focused on social issues, including workplace discrimination and workplace harassment. In June 2022, shareholders filed a class action against a major U.S. bank in relation to alleged discriminatory hiring practices and reports of “fake interviews” for diverse candidates, which led to a substantial decline in the stock price. The shareholders claim that these interviews were set up to satisfy diversity requirements, while the positions were already promised to other internal candidates. By November 2022, the DOJ and SEC had both launched investigations into these hiring practices. Similarly, a class action suit alleging systemic bias in the payment and promotion of women at a major investment bank is scheduled to go to trial in June 2023.
In January 2023, a federal district judge for the Central District of California dismissed a shareholder suit against a major video game company for the third and final time. Shareholders alleged that the company cultivated a hostile work environment and an endemic “frat house” culture that the company failed to remedy. The judge’s decision was based on a lack of sufficient new factual allegations and plaintiffs’ failure to adequately plead demand futility. In January 2023, a judge for the Delaware Court of Chancery allowed a shareholder suit against a prominent fast-food company to proceed to trial. Shareholders claim that the company’s chief human resources officer failed in his duty of oversight, engaged in acts of sexual harassment, and promoted a toxic workplace culture.
Finally, in March 2023 a former employee filed a complaint against a major multi-national investment firm, alleging that they were furthering a campaign to replace white male workers, and that he was fired unfairly for raising questions about the propriety of the firm’s ESG investing practices.
Actions by ACCC and ASIC
ASIC launches first greenwashing proceedings
Following a spate of infringement notices against ASX-listed entities for alleged greenwashing (including against Black Mountain Energy Limited on 5 January 2023), the Australian Securities and Investment Commission (“ASIC”) launched its first court action alleging greenwashing by Mercer Superannuation (Australia) Limited (“Mercer”) in the Federal Court of Australia in February 2023. ASIC alleges that Mercer made misleading statements regarding the sustainable nature of certain superannuation investment options (Sustainable Plus Investment Options). In particular, ASIC alleges that Mercer claimed it excluded investments in companies involved in carbon-intensive fossil fuels, alcohol and gambling, when in fact it had invested in these sectors.
ASIC is seeking declarations, pecuniary penalties, and injunctions preventing Mercer from continuing to make the alleged misleading statements and orders requiring publicising any contraventions found by the court.
ASIC’s greenwashing focus ties into its broader enforcement priorities for 2023, which include sustainable finance practices and disclosure of climate risks.
ASIC enforces whistleblower laws and pursues individual directors
On 1 March 2023, ASIC announced that it had commenced proceedings against coal producer TerraCom Limited (“TerraCom”) and certain of its officers and directors. The first of their kind, the proceedings concern allegations that TerraCom and its officers and directors failed to comply with whistleblower protections under the Corporations Act 2001 (Cth) by making two ASX announcements and publishing an open letter in the media in which TerraCom denied a whistleblower’s allegations that the company had falsified coal quality certificates. ASIC also alleges that certain TerraCom directors and officers breached their duty to exercise reasonable care and skill by failing to take reasonable steps upon receipt of an independent investigator’s report into the issues raised by the whistleblower. Following the announcement, ASIC released Report 758 on Good practices for handling whistleblower disclosures. See Allens’ Insight here for more details.
Separately, the Public Interest Disclosure Amendment (Review) Bill 2022 (Cth), which proposes amendments to current protections within the existing Commonwealth public sector whistleblowing framework, is currently in the Australian Senate.
ACCC investigating businesses for greenwashing claims
In early March 2023, the Australian Competition and Consumer Commission (“ACCC”) advised that it is investigating a “number of businesses” for greenwashing claims following an internet sweep, which found 57% of businesses reviewed had made concerning claims about their environmental credentials. The ACCC found that the cosmetics, clothing and footwear and food and drink sectors had the highest proportion of such claims, though a number of other sectors also had a significant proportion of claims. The ACCC noted that those businesses using terms such as “environmentally friendly”, “green”, or “sustainable” were required to substantiate those claims, including through scientific reports or other reliable evidence. A day after this report was released, Greenpeace Australia Pacific announced it had filed a complaint with the ACCC asking the ACCC to investigate whether Toyota had engaged in misleading or deceptive environmental claims by understating its car emissions and overstating its clean transport commitments. In its complaint, Greenpeace alleges that Toyota's commitment regarding net zero by 2050 was inconsistent with its current plans for petrol-powered car production and that Toyota was in actuality “acting globally to block the take-up of electric vehicles”. Greenpeace alleges that Toyota's claims may be misleading or deceptive within the meaning of sections 18 and/or 29 of the Australian Consumer Law.
Native Title appeal filed in Federal Court against Santos Narrabri Gas Project
In January 2023, Gomeroi traditional owners in north-west New South Wales filed an appeal in the Federal Court of Australia against the decision of the Native Title Tribunal to permit the Narrabri Gas Project, a gas extraction operation. The Native Title Tribunal had previously found that the public interest of the project outweighed the Gomeroi people's environmental and cultural concerns and that the project could go ahead if Santos took all necessary steps to ensure that additional cultural heritage research was done prior to the project's next stage. Santos had argued that the project would secure NSW energy supply and had made a commitment that gas from the project would go toward the domestic market. The Gomeroi people had argued that Santos had not negotiated with them in good faith and that the project would result in grave and irreversible consequences for the Gomeroi people’s culture, lands and waters. The Gomeroi people also argued that the project would contribute to greenhouse gas emissions and environmental harm.
Federal Court test case brought against National Australia Bank regarding unreasonable additional hours
In March 2023, the Finance Sector Union (“FSU”) commenced proceedings against the National Australia Bank (“NAB”) on behalf of four managers who allegedly had to work unreasonable unpaid hours over several years. The case follows a survey conducted by the FSU in late 2021 that found 93% of NAB employees who sat in certain pay bands were working more than 38 hours per week. The case is expected to test, for the first time in the context of the professional services industry, the “reasonable additional hours” provisions of the Fair Work Act 2009 (Cth), which note that an employer must not request or require an employee to work more than 38 hours a week unless the additional hours are reasonable.
The FSU claims that NAB had knowledge of the excessive hours, through the union or employees raising the issue, and that the practice formed part of a systemic pattern. The four managers are reportedly seeking compensation for damages to their health and family life.
Japan's largest power company, JERA, faces whistleblowing complaint over disclosures in Singapore
Australian activist group Market Forces has lodged a complaint with the Singapore Exchange (SGX) whistleblower office in relation to JERA Co Inc, alleging that it did not fully disclose risks related to a USD 300 million bond issue on the SGX last year.
The activist group has asked the SGX to look at the bond prospectus, saying that there is insufficient disclosure of systemic risks over investments in LNG, particularly in light of JERA’s exposure to the LNG market (it is reported to be one of the world's biggest LNG buyers). The group also alleges that disclosure is insufficient in relation to ongoing litigation in Australia.
Notably, Market Forces did not invest in JERA bonds (which were marketed to institutional investors only), but were able to file the complaint as the SGX's whistleblower system is open to the general public. JERA is a joint venture between Tokyo Electric Power and Chubu Electric Power. This complaint follows previous action by Market Forces, who, along with four other groups, jointly urged Tokyo Electric and Chubu Electric to improve climate-related risk disclosures at their respective annual shareholders meetings last year, and is reflective of the increasing scrutiny by climate activists in relation to financial disclosures in the energy industry.
South Korean government to crack down on greenwashing
It has been reported that the South Korean Ministry of Environment will introduce a law that will allow them to fine companies up to three million won (USD 2,300) for making misleading claims in relation to sustainability. It is understood that the regulator does currently have the remit to issue penalties against companies for greenwashing, but it is intended that the new regulation simplify the process.
The South Korean Ministry of Environment has previously issued administrative guidance to two oil majors and a steel-making company advising them to amend their advertising on the basis that it was misleading. This is in addition to the action taken by activist groups who brought separate claims to the Korea Fair Trade Commission alleging that SK enmove (previously SK Lubricants Co.) was being misleading in using an unreliable carbon off-setting project to advertise its products as achieving “zero carbon emissions” (see our December 2022 ESG Disputes Bulletin here).
Role of gas in South Africa's just energy transition being challenged
In December 2019, Eskom Holdings SOC (Eskom) was granted an Environmental Authorisation to construct a gas-to-power plant. Two civil society organisations advocating for environmental justice (South Durban Community Environmental Alliance and Trustees of Groundwork Trust) (the “Applicants”) lodged a review application against the decision to grant the Environmental Authorisation on a number of grounds, including that upstream greenhouse gas emissions were not comprehensively considered, and shortcomings in the public participation process.
On 6 October 2022, the High Court dismissed the review application, but granted ancillary orders to remedy the defects in the public participation process. The High Court of South Africa (Pretoria) dismissed an application for leave to appeal by the Applicants. On 20 February 2023, the Applicants filed papers to request direct leave to appeal from the Supreme Court of Appeal (“SCA”). The Applicants argue that there are compelling reasons for the SCA to hear the appeal, noting that the High Court’s judgement has significant implications on how South Africa responds to the twin challenges of (i) climate change and (ii) long-term energy generation in order to deal with energy poverty in the country.
With respect to the Karpowership case, which relates to three proposed powership projects in South African ports to generate electricity from natural gas, the Minister of Forestry, Fisheries and the Environment (the “Minister”) issued appeal decisions for all three projects on 1 August 2022. The Minister decided to send the applications back to the competent authority to ensure that any gaps in the information provided in support of the projects, and procedural defects in relation to the public participation process that led to the rejection of the EA applications, were addressed during the reconsideration and re-adjudication of the applications. The Environmental Impact Assessment (“EIA”) reports for all three projects were resubmitted on 9 January 2023 for decision-making.
On 7 March 2023, the Department of Forestry, Fisheries and Environment refused one of the applications for Environmental Authorisation. With respect to the second powership project, an NGO raised concerns of defects in the public participation process with respect to the participation of small-scale fisheries, one day before the decision was due. The decision will follow investigations regarding the NGO's allegations. With regard to the third project, the EIA report was withdrawn based on an urgent application by the Environmental Assessment Practitioner to comply with regulatory requirements.
ESG class actions - silicosis in miners
The Supreme Court of Appeal (“SCA”) dismissed a bid by DRDGold and East Rand Proprietary Mines to challenge a court certification of a class action which could potentially result in liability for damages suffered by thousands of miners who contracted silicosis. This ruling means that the class action can proceed.
Following the certification of the litigation as a class action, several of the initial 32 mining companies (and their parent companies), which are the owners of 82 mines which had been cited, entered into settlement agreements with miners who worked for them. DRDGold and East Rand Proprietary Mines tried to challenge the certification ruling. The judge of appeal said it was common cause that over several decades many thousands of underground mine workers in South African gold mines contracted silicosis or pulmonary tuberculosis, caused through the inhalation of large quantities of silica dust. The judge of appeal also confirmed that as a result of a settlement agreement signed by the majority of the mines, the certification only now applied to six mining companies. Regarding the declaration, the judge of appeal said the potential class members were poor and vulnerable and the litigation had already been ongoing for 10 years. The SCA accordingly struck the challenge from the roll, ordering the mines to pay the costs.
Human rights actions in relation to power generation
Residents living in two municipalities in which Eskom had reduced electricity supply (a “load reduction”) successfully applied for and obtained an interdict against the company, requiring it to restore the electricity supply. The residents argued that the load reduction caused deplorable living conditions that violated basic human rights, including the right to dignity, the right of access to healthcare services, the right to access sufficient water, the right to an environment that is not harmful to health or wellbeing, and the right to basic education. Eskom's appeal to the Constitutional Court was dismissed.
The case of Becker v Minister of Mineral Resources and Energy and Others addressed the dismissal of the director of the National Nuclear Regulator, who had been appointed by the Minister of Mineral Resources and Energy. The director had been part of a community organisation which critiqued nuclear energy on the grounds of safety. The director subsequently sought judicial review into the decision to have him dismissed. The court found in favour of the director and ruled the discharge to be procedurally unfair. The court did not expressly set out the extent to which individuals holding such positions could exercise the right to freedom of expression to express dissenting views. However, the court held that the exercise of the constitutional right to freedom of expression, and the association that the director had with the community organisation, did not necessarily prevent him from being disqualified as a director if there was a conflict of interest.